Continuing the “Journey through uncharted waters” series, due to reader feedback, we thought we would expand a bit more on last month’s issue, where we looked at setting targets in the investment portfolio.

The process begins with having a written plan. This identifies objectives and constraints to assist NSL in constructing the overall investment portfolio. Step 1 is to identify the different asset classes and Step 2, is setting the targets with a Strategic Asset Allocation (SAA), as outlined in last month’s piece.

Elaborating more on Step 2, when determining an SAA, consideration must be given to the return objective and risk profile. There is a balance that needs to be struck between “how much risk you are willing to take, and how much money you want to make”, or risk vs return.

The trade-off between risk and return is a fundamental consideration when setting the SAA. Typically, the higher the risk of an investment, the higher the expected return; the lower the risk, the lower the expected return.

Source: Investopedia

NSL has embodied this with our goal to “Preserve and maximise superannuation benefits for our members” to at least achieve the investment goal of CPI + 2%, over the medium term through prudent investment management.

Reiterating from last month, as the journey progresses, conditions may change requiring short-term movements within the SAA.

After setting allocation and targets, the next part of the process is selecting which investments to buy or sell and overall investment monitoring. This will be covered in next month’s publication

Nambawan Super understands that investing is a journey and takes time, having an Investment Strategy that has certain features, covers certain assets and when allocated appropriately, allows the Fund to continue to grow member’s funds for a journey after retirement.